Payroll is where “free” gets risky. The best payroll software for small business does more than add up hours: it calculates tax, files returns and pays people on time, and mistakes bring penalties. Paid services sell exactly that. Free open source tools can handle calculation and records, but compliance is yours to set up. Read this before you decide.
What payroll software must do
- Calculate gross pay, deductions, employer contributions and net pay correctly
- Handle your country's tax and social contribution rules and keep them current
- Generate payslips and the reports your regulator expects
- Track leave, overtime and changes during the month
- Post payroll entries to your accounting system
The honest limit of free tools
Most open source payroll tools give you a framework and salary structures, not ready-made compliance for your country. Rates, slabs and filing formats change every year, and someone has to keep them updated. For a team of a few people, a local payroll provider or your accountant is often safer and cheaper.
When a free tool makes sense
- You already run ERPNext or Odoo Community and want payroll in the same system.
- You have someone who can configure salary structures and test them against a sample payroll.
- Your accountant agrees to review the output each month.
Free payroll options compared
1. Frappe HR (HRMS)
HR and payroll for ERPNext usersFrappe HR is an open source HR and payroll application that works with ERPNext. The strongest all-round free option, though you configure salary structures and local rules yourself.
What it offers for payroll
- Employee lifecycle: onboarding, promotions and transfers
- Leave and attendance with configurable policies and regional holidays
- Payroll and taxation: salary structures, income tax slabs and standard payroll runs
- Performance management with goals and key result areas
8,929 stars · GPL-3.0 · repo updated Oct 2026
Read the full Frappe HR (HRMS) review2. OCA Payroll for Odoo
Payroll for Odoo Community usersCommunity-maintained Odoo modules for payroll management. Useful if you already run Odoo Community, but you must adapt them to your country.
What it offers for payroll
- Manage employee payroll records inside Odoo
- Maintained by the Odoo Community Association
- Modules versioned per Odoo release
124 stars · AGPL-3.0 · repo updated Oct 2026
Read the full OCA Payroll for Odoo review3. Payroll Engine
Developers building country-specific payrollAn MIT-licensed, regulation-driven payroll framework for developers. It is a toolkit, not a ready-to-use product for a small office.
What it offers for payroll
- Regulation layers you configure per country and industry
- Docker stack to run it locally
- Payroll examples and automated tests
- JSON schemas for integration
132 stars · MIT · repo updated Oct 2026
Read the full Payroll Engine review4. ERPNext
Accounting side of payrollERPNext posts payroll expenses to accounting once HR and payroll are set up with Frappe HR.
What it offers for payroll
- Leads, opportunities and quotations
- Accounting and inventory included
- Very large community
- Frappe Cloud hosting optional
40,232 stars · GPL-3.0 · repo updated Oct 2026
Read the full ERPNext reviewA common suggestion that is not open source
Check the license before you commit. These show up often in roundups:
- IceHrm: Licensed under the Elastic License 2.0, which is not an open source license.
Checked from LICENSE files and GitHub status on 16 October 2026. Licenses can change. Evidence links are listed at the end of this guide.
How to test before trusting it
Example: a ten-person workshop on ERPNext
An illustrative example, not a real company.
A workshop already runs ERPNext for sales, stock and accounting, and wants payroll in the same system. The owner and the accountant agree to try Frappe HR.
They set up salary structures with the accountant, load last month's data and run payroll in parallel with the accountant's own calculation. Two differences appear, both caused by a wrongly configured deduction. They fix the structure and run a second parallel month before switching over.
The accountant still files the returns. The software calculates, produces payslips and posts the entries to the books.
What usually goes wrong
- Going live without a parallel run.
- Assuming the default salary structure matches your country's rules.
- Forgetting to update rates when rules change each year.
- Storing payroll data on an unprotected server.
- Treating the tool as a compliance guarantee.
Free self-hosted or paid cloud: how to decide
Paid payroll services often include tax filing and penalty protection, which is the main reason many small businesses choose them. Self-hosted payroll can make sense if you already run an ERP and have someone to maintain it, with an accountant checking results. If a payroll error would be costly, pay for a service.
If you do self-host payroll, treat it as sensitive: it contains salaries and personal data. Use HTTPS, strong access control and encrypted backups. See our security checklist. A VPS from a provider such as Hostinger gives you the control you need for that.
Need a server to host it?
Self-hosting a CRM needs a server. PHP and MySQL apps can often run on ordinary web hosting, while Docker, Node, Python or Java apps usually need a VPS. Check each project's requirements first. Hostinger offers both shared web hosting and VPS plans.
Affiliate disclosure: this is an affiliate link. If you buy through it we may earn a commission at no extra cost to you. CRMs and software are listed independently of any hosting partner. Learn more.
Official links for the tools in this guide
Every tool above has its own page on our site with the full review. These are the official sources, so you can download the latest version safely.
- Frappe HR (HRMS): Official website · Source on GitHub
- OCA Payroll for Odoo: Source on GitHub
- Payroll Engine: Official website · Source on GitHub
- ERPNext: Official website · Source on GitHub
Sources for the license and maintenance warnings in this guide, so you can check them yourself:
- IceHrm: repository and LICENSE file